How Investors Can Actually Collect The $8,000 Homebuyer Tax Credit

The government has given investors a huge tool for selling houses

. That tool, of course, is the Homebuyer Tax Credit that was recently extended and expanded to include all homebuyers. The credit helped keep up demand as home prices kept plummeting. It helped convince people to buy homes when they might have otherwise stayed in their current home until the market bottomed out.

This was a boon to investors who might have otherwise been stuck with a portfolio of houses that they couldn't sell. Even in the most turbulent housing market in memory, when you combine owner-financing with a government program that gives people $8,000, houses are pretty easy to unload!

Imagine how many more people you will be able to sell your houses to if you are able to provide owner financing for people who might not have the credit score necessary to get an FHA loan. Since you are actually selling, not just leasing it, you can collect the credit. You can then work with the homeowner to improve their credit and get them refinanced, cashing yourself out in the process.

The thing is, this is a government program, after all, so it's not exactly the easiest thing to navigate. A lot of investors are wondering how to make sure the buyer gets you the money when they receive the check from the IRS.

This is especially important in circumstances where the buyer can't come up with the amount they will get with the credit at the time of the sale, so the investor would finance the difference until the refund arrives. This is normally done with a small second mortgage.

The best way (though not a perfect way) to make sure you get the money is actually quite simple, if not intuitive. You should provide a copy of page two of IRS form 5405 and point out to the buyer where it says the buyer must live in the home for at least three years or they will have to pay it back. After they are made aware of this, you want to instruct them to use your tax preparer to file the return for their credit.

Next have the homebuyer meet with your tax preparer, be it a CPA, enrolled agent, or attorney to have the power of attorney signed. Once that is signed, you should instruct your tax preparer to notify both you AND the buyer when the check is received. Then you can arrange a time to go with the buyer to pick up and deposit the check, guaranteeing you will be paid.

As always, it is always a good idea to get a simple, separate form created and signed by all parties that spells out the agreement. This could come in handy if the buyer tries to say that they never had an agreement with you to collect the $8,000.

by: Bob Massey

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